This is one of the most important things to know when you are considering short sale, what type of loan you have and what is the difference between recourse and non recourse loan.

When you purchase your home, most loans are considered as nonrecourse loan or it’s also called purchase money loan, which is secured only by the home and you are not personally liable for the balance if you do a short sale.

But when you refinance your previous loan then it is considered as recourse loan. Most second loans and home equity loans (known as HELOC) are also considered as recourse loans, which mean you are personally liable for the balance when you sell your house or foreclose and if the sale doesn’t cover all your loans.

Now, whether its recourse or nonrecourse, it also depends on the lenders, some lenders follow homeowners to collect for the remaining balance based on their business decision even on nonrecourse. It also depends on whether your state is a deficiency or non-deficiency state. It’s a whole different topic (deficiency and non-deficiency) which I will explain in my next blog.

If you are not sure whether you loan is recourse or non-recouse loan, then you can either check your loan note or check with your loan agent. So, it’s always good to know the difference between recourse and non-recourse loan.

If you are considering short sale then consult with CPA or tax attorney for any tax ramification before you list your house with any realtor.

You can reach me directly at (910) 622-0319 with any questions, I would be glad to assist you. Please Visit my website shortsalewilmingtonnc.com .

Nilesh Jethwa

Wilmington NC Short Sale Expert

Exciting News for Homeowners! This new law is going to be effective as of April 5, 2010, it is called HAFA – Home Affordable Foreclosure Alternative, which will help homeowners who are having difficulty in paying the mortgage and cannot afford the loan modification program under the Home Affordable Modification Program (HAMP).  This new guidance is supplemental of HAMP, which gives guidance to servicers to work on short sale or deed-in-lieu to avoid foreclosure on an eligible loan under this program.

This new program is beneficial for everyone – borrower, servicer and investors by providing foreclosure alternatives and incentives for participating in this program. Currently, this program is available for loans which are not owned or guaranteed by Fannie Mae or Freddie Mac.

Borrowers that meet the eligibility criteria for HAMP but cannot afford the modified payments, or do not successfully complete a Trial Period Plan, or default on a HAMP modification (missed at least two consecutive payments) or request a short sale will be eligible for HAFA program.  The short sale must be arm’s length transaction

Let me tell you some of the benefits for homeowners of doing short sale under this program:

1. The servicer may not require a cash contribution or promissory note from the borrower
2. The servicer will approve the list price even before listing the house if you are qualified for HAMP but cannot afford it
3. Servicer must forfeit the ability to pursue a deficiency judgment against the borrower.  This is one of the biggest benefits for homeowners who are doing short sale under this program, so after the sale, they don’t have to worry about any deficiency judgment after selling the house
4. The servicer will pay the allowable closing costs for the seller to close the transaction
5. The servicer may pay the subordinate liens not more than 6% of the unpaid principle balance of their loan to release the lien and full release of borrower liability (No more fear of deficiency judgment from the second lien holder!)
6. Borrowers will get $3,000 as relocation expense at close of escrow.
7. The servicer will pay the realtor’s commission, so no out of pocket expenses from the seller

Short sale is a complex transactions involving coordination and cooperation amount all parties involved in this transaction, so work with an experienced short sale real estate agent who have experienced in closing short sales, not all agents are experienced in short sale.

There are certain guidelines and time period, which you have to follow in order to complete the short sale successfully, so check the agent’s experience in short sale before selecting as your agent for assisting in your short sale.

If you have any questions on HAFA short sale or would like to see whether you qualify for the HAFA program, please call me at (910) 622-0319, I would be happy to assist you. If you are in bay area and would like to meet with me personally for a free confidential consultation then also give me a call. www.shortsalewilmintonnc.com

Posted by NIlesh Jethwa Wilmington NC Short Sale Expert

In order to qualify for HAFA, a homeowner must meet the basic eligibility requirements for HAMP. They are:
• The property is the borrower’s primary residence.
• The mortgage loan is the first lien originated before 01/01/09.
• The mortgage is delinquent or default is reasonably foreseeable.
• The current mortgage balance is $729,750.00 or less.
• The borrower’s monthly mortgage payment exceeds 31% of the borrower’s gross income.
• If the borrower has mortgage insurance, the insurer must waive any right to collection from theborrower.

If a borrower meets the following criteria, the participating servicer must give the borrower the option to enter into the HAFA program:
• The borrower did not qualify for the HAMP trial period.
• The borrower did not successfully complete the HAMP trial period.
• The borrower is delinquent on their HAMP modification.
• The borrower requests a short sale or deed-in-lieu.

The good news for sellers who participate in HAFA:
• The lender is required to forgive any deficiency (no more waiting and wondering if they going pursue the deficiency.)
• The sellers will get $1500.00 at close of escrow.
• Servicers are expected to provide an approval letter 10 days from the date the offer is received (no more waiting for months with no guarantee that the short sale will be approved.)
• The short sale will be pre-approved and the server will provide the listing agent with a pre-approved listing price.
• The server will pay up to 3%, but no more than $3000.00, to junior lien holders.
• If a borrower meets the HAMP qualification requirements listed above, they can participate in HAFA without going through the HAMP program first; as long as their servicer is participating in the program. However, if the borrower hasn’t gone through HAMP first, it will be very difficult for a servicer to get an approval letter to the borrower ten days from the offer submission date, and it will more than likely create delays. During the HAMP program process the borrower’s hardship is evaluated. The servicer becomes very familiar with the homeowner’s situation and all the obstacles that cause short sales to take forever are dealt with. Short sale pre-approval is pretty much determined through the HAMP process, so going through the HAMP program first will help the short sale to move quickly through HAFA.

The good news for buyers:
• The endless waiting for short sale approval will be eliminated. Short sale approval in 10 days or less.
• Lenders must allow at least 45 days for close of escrow.

This program will take all those frustrating unknowns out of the short sale
process.

The HAFA summary states that it is the borrower’s responsibility (with the assistance of their Realtor) to “deliver clear marketable title to the purchaser or investor.” It further says that the servicer can assist the borrower and the listing agent in the negotiations with lien holders, but they are not required to do so. An experienced Short sale agent knows how to negotiate with junior lien holders; however juniors could create problems based on HAFA guidelines.

The program provides $3000.00 for junior lien holders. It also requires that junior lien give up the right to pursue any deficiency. If a junior wants more than $3000.00 and/or is not willing to forgive the deficiency, the borrower will not be able to obtain clear title as required. Multiple junior liens could create a problem. If there is more than 1 junior lien holder, $3000.00 may not be enough to satisfy them all.

Another potential issue is that senior liens are not mentioned in the program guidelines. Property taxes are considered a senior lien and currently lenders will pay past due property taxes in order to attain clear title. Since the HAFA program stipulates that providing clear title is the borrower’s responsibility, one could assume that the borrower will have to pay any past due property taxes, before close of escrow, so clear title can be provided.
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One other important requirement:
• The transaction must be completely arms length. No one involved in the transaction can be related. This includes the Realtors, the buyers and the sellers.

Currently in a short sale transaction the lender does not automatically give up the right to pursue. Large numbers of short sales fail because borrowers are concerned that the lender may pursue the deficiency. The fact that the HAFA program requires that the lender forgives any deficiency is a huge relief for borrowers struggling with their mortgage. Other than the problems that may arise with other lien holders, this program is a major step in the right direction for borrowers who are “under water.” It gives them a real chance at a fresh start. There are so many borrowers out there that are responsible people who find themselves in a night mare they never imagined, this program is an opportunity to move beyond the night mare and begin again. It is also a win for everyone who lives in the neighborhood of the borrower who participates in HAMP. Short sales generally do not bring down the value of the neighborhood as much as an REO does. Overall we see this as a positive solution for a homeowner in a very difficult situation.

This is one of most important step in short sale, hire an experienced agent, if that agent is Certified and trained in short sale then that would be a plus. An experienced short sale agent knows how to negotiate with lender, how to prepare the short sale package and how to market your property to get buyer for your house. Before hiring, check that agent’s web presence, ask for reference and check whether they have successfully closed any short sale transactions.

If you are in Wilmington , NC  or near by area and need my service for short sale, don’t hesitate to contact me at 910-622-0319, your expert short sale agent in Wilmington area. www.shortsalewilmingtonnc.com.

Posted by Nilesh Jethwa

Posted by Nilesh Jethwa ( Wilmington NC Short Sale Specialist) 

As a Certified Short Sale Specialist in the Wilmington area, after handling several short sale transactions, I know there are lots of things which make the successful closing of a short sale listing.

As you all know that the successful closing of short sale needs an experienced short sale real estate agent who knows what all the steps to take in order to move the short sale process successfully towards closing.  One of the important things is to submit the short sale package correctly at the first time itself which will save at least 2-3 weeks of times but there’s one more things which makes the transaction to close successfully, just keep reading, you will know that shortly… 

Most of the agents know what all documents to submit to the bank for short sale approval but still you will see that many listings still on the market for more than 6-8 months or it expires from the market with no buyer and even if they get buyers, there’s no answer from the bank and the buyer doesn’t know why it takes longer time or any status on their offer. After reading the above lines, I’m sure you have figured out what is the most important thing in a short sale process – Yes! You guess it right, it is “Communication”! This is where most of the agent fails in short sale.

If there’s no proper communication then deals can fell apart even if you start everything perfectly in the beginning. This is one of the big problems in short sale process and especially after getting an offer from buyer. If the seller’s agent doesn’t communicate properly with buyer’s agent then buyer’s agent cannot explain to the buyer, what’s going on with their offer and if the buyer doesn’t know what’s going on after several weeks, they will lose interest and will look for some other houses. 

If there’s any lien like home owner association (HOA) then you need to communicate properly with them also to close the short sale successfully. Also at the same, you should communicate properly between the title officers and sellers lender (if more than one lender, then need communication with all the lenders).

Short sale is a complex sale, so it is really important that you work with an experienced agent in short sale to sell your house. As you figured out that in short selling your house, it is not just finding a buyer and negotiate with your bank, you need to communicate timely with all the parties involved like buyer, seller, agents, bank, escrow officer, home owner association(if any) and any other lien holders.

All the things are important in successful short sale process like proper documentation, marketing of the house and finding a buyer etc., but in my experience if there’s no communication between all these parties then you cannot close the short sale successfully. So, the most important thing in short sale transaction is “Communication”.

If you are in the Wilmington and Leland area and looking for an experienced short sale agent then call me at 910-622-0319, I would be more than happy to assist you in any way I can. www.shortsalewilmingtonnc.com.